Check out more stories at themelbournecitynews.com.au
Want to become a digital subscriber? Join now on our latest offer here
The number of empty rental homes across Melbourne has almost doubled in the past year, with the tenant exodus hitting Southbank, Docklands and the CBD hardest.
Experts have identified the trio as “danger zones” buyers should steer clear of at all costs — but on the flip side, tenants moving in could just about “name their price”.
Propertyology head of research Simon Pressley said Melbourne’s inner-city apartment market had “grossly underperformed” for several years now.
And the COVID-19 crisis has made the sector even more hazardous by heightening pre-existing oversupply issues.
Mr Pressley found 20,891 rental homes citywide lay vacant at the end of August, equating to a 3.4 per cent vacancy rate. This was up from 11,830 a year prior.
Southbank’s vacancy rate skyrocketed from 4.3 per cent to 16.6 per cent in the same period, while Dockland’s rose from 3.8 per cent to 16.1 per cent, and the CBD’s, from 2.6 per cent to 8 per cent.
Mr Pressley said employment loss in hard-hit sectors like hospitality and tourism, and the absence of international students and migrants due to border closures, had caused an inner-city tenant exodus.
“It’s sad for the tenants who have lost their jobs and had to move out (and) for the landlords who … have to try and service mortgages without rental income,” he said.
“It will be sad when these people have no choice other than to sell already poorly performing assets.”
Propertyology found a typical apartment in Southbank, Parkville and South Yarra had gained less than 1 per cent in value each year of the past decade, while Docklands units had declined 0.2 per cent.
Vacancy rates had also risen annually in South Yarra (from 2.4 per cent to 6.2 per cent), St Kilda (2.1 per cent to 4.9 per cent), Box Hill (3 per cent to 5.4 per cent), Prahran (2.2 per cent to 4.8 per cent) and Parkville (2.7 per cent to 4.5 per cent).
The figure is calculated by comparing how many rental listings have been advertised online with the total number of established rental properties in a region.
Mr Pressley said a small silver lining was vacancy rates appeared to have remained steady outside Melbourne’s inner ring — but the city’s extended lockdown could change that.
“When the coronavirus first hit, we expected a spike in inner-city vacancy rates. It was a case of whether individual landlords had enough cash flow to get though a six-week national lockdown,” he said.
“But this is a much harder and longer lockdown.”
Continued rental price falls and landlords abandoning the market altogether were likely outcomes, he said.
RiskWise Property Research has also identified the CBD and Docklands among the nation’s top 10 “danger zone” markets, with chief executive Doron Pereg urging investors to be particularly cautious of buying off-the-plan apartments in the coronavirus environment.
He warned of the likelihood of further unit price declines, which could create problems at settlement, and cash flow issues, with the pandemic drastically reducing the tenant pool for inner-city Melbourne properties.
Melbourne vacancy rates
Southbank: 16.6% (up annually from 4.3%)
Docklands: 16.1% (3.8%)
Melbourne CBD: 8% (2.6%)
South Yarra: 6.2% (2.4%)
St Kilda: 4.9% (2.1%)
Box Hill: 5.4% (3%)
Prahran: 4.8% (2.2%)
Parkville: 4.5% (2.7%)
Port Melbourne: 4.2% (2.1%)
Richmond: 3.5% (1.9%)
Kensington: 2.5% (1.2%)
Greater Melbourne: 3.4% (2%)
Source: Propertyology, comparing August 2020 to August 2019